SURYALAXMI - Suryalak. Cott.

📊 NSE: SURYALAXMI 🏢 Textiles - Cotton/Blended 📅 Last Updated: 12/14/2025 13:57

💰 Financial Performance

Revenue Growth by Segment

Suryalakshmi Cotton Mills (SCML) derives 60% of its revenue from denim fabric and 40% from spinning operations (cotton and polyester viscose). In Q1 FY2026, the company registered revenues of INR 178.3 Cr, representing a 12.4% YoY growth compared to Q1 FY2025. However, FY2025 overall witnessed minimal growth due to sluggish demand in the yarn segment.

Geographic Revenue Split

Not specifically disclosed in available documents, though the company operates across multiple Indian states and is subject to various local tax jurisdictions.

Profitability Margins

The operating margin contracted by 60 bps YoY to 6.4% in FY2025, primarily driven by rising power and labor costs. The net profit margin remained flat at 0.46% for FY2025. Return on net worth was recorded at 1.35% in FY2025 compared to 1.36% in FY2024.

EBITDA Margin

The OPBDITA for Q1 FY2026 was INR 13.7 Cr, an increase of 12.2% YoY. The operational profit margin for FY2025 stood at 4.74%, a slight improvement from 4.62% in FY2024, despite the contraction in gross operating margins.

Capital Expenditure

The company incurred debt-funded capital expansion in FY2024 to increase loom capacity. For FY2025 and FY2026, no major capital expenditure is planned, with expected cash accruals of INR 25-27 Cr being prioritized for debt repayment of INR 5.6 Cr and INR 7.1 Cr respectively. A smaller capex of INR 20 Cr for value addition is under consideration for FY2026.

Credit Rating & Borrowing

ICRA reaffirmed the long-term rating at [ICRA]BBB but revised the outlook from Stable to Negative in September 2025. This revision reflects a weaker-than-expected performance in FY2026 and slower improvement in debt metrics. Short-term ratings are reaffirmed at [ICRA]A3+.

⚙️ Operational Drivers

Raw Materials

Key raw materials include raw cotton (approximately 35-40% of costs) and synthetic yarns such as polyester viscose. Crude oil prices significantly influence the cost of synthetic yarns.

Import Sources

Not specifically disclosed, but the company monitors the domestic cotton crop, which was estimated at 35.7 million bales, impacting local procurement prices.

Capacity Expansion

Current capacity includes spinning and denim fabric weaving (loom capacity). Recent expansion focused on increasing loom capacity to enhance denim production, though specific MTPA/unit figures were not provided.

Raw Material Costs

Raw material costs are highly volatile; a reduction in cotton crop estimates to 35.7 million bales led to firming prices. Backward integration into value-added and fancy yarns is used as a strategy to mitigate cost volatility and improve margins.

Manufacturing Efficiency

The company utilizes backward integration (spinning to denim) to capture higher value. Inventory turnover ratio moderated to 3.68x in FY2025 from 4.19x in FY2024, indicating a slight slowdown in movement.

Logistics & Distribution

Not disclosed as a specific percentage of revenue.

📈 Strategic Growth

Expected Growth Rate

12.40%

Growth Strategy

Growth is targeted through backward integration into value-added and fancy yarns to improve margins. The company is also focusing on the denim segment, which provides 60% of revenue, while utilizing a buffer of INR 20 Cr in sanctioned lines to support liquidity and potential small-scale capex for efficiency.

Products & Services

Denim fabric, cotton yarn, polyester viscose yarn, and value-added/fancy yarns.

Brand Portfolio

Suryalakshmi.

New Products/Services

Focus on value-added and fancy yarns to differentiate from commoditized spinning products.

Market Share & Ranking

Not disclosed.

🌍 External Factors

Industry Trends

The industry is characterized by high fragmentation and commoditization. There is a shift toward sustainability, with SCML weaving sustainable practices into production to reduce reliance on chemicals and energy.

Competitive Landscape

The industry is highly fragmented with intense competition from both domestic and international players in the denim and yarn segments.

Competitive Moat

The company's moat is built on its established market position and backward integration. However, this is considered moderate due to the lack of significant pricing power in a fragmented market.

Macro Economic Sensitivity

Highly sensitive to global cotton prices and crude oil fluctuations (affecting synthetic yarn). Domestic interest rate fluctuations impact the cost of the INR 152.2 Cr working capital debt.

Consumer Behavior

Resilient demand for denim fabric has supported revenue growth (9% in FY2023), while the yarn segment has shown more volatility.

Geopolitical Risks

International scenarios are noted as factors that could cause actual results to differ from projections, particularly affecting export demand for denim.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by the Companies Act 2013 and SEBI (LODR) Regulations. The company must comply with environmental and safety protocols regarding hazardous materials and fire safety.

Environmental Compliance

The company is ISO 14001:2015 certified and systematically assesses ESG risks to ensure sustainable business practices.

Taxation Policy Impact

The company is subject to periodic challenges by local tax authorities. Key audit matters include the evaluation of uncertain tax positions regarding direct and indirect taxes.

Legal Contingencies

The company faces uncertain tax positions that involve significant management judgment. Specific case values are not disclosed, but they are monitored as contingent liabilities.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of raw material prices (cotton and crude-linked synthetics) and the ability to pass these costs to customers. A weaker-than-expected performance in FY2026 led to a Negative rating outlook.